Gold companies disguise themselves to be able to exist 2012-07-13 - VTC

A lot of gold companies have received the proposal from big banks and goldsmith companies to cooperate with them as their agents. This proves to be the only way for the companies to follow after the new decree on gold market management takes effect.

More and more goldsmith companies to shut down

Deputy Governor of the State Bank of Vietnam Le Minh Hung on July 4 affirmed that the State would hold the monopoly in making bullion gold, and that SJC would be used as the national gold brand.

Explaining why the central bank decided to choose SJC, the existing gold brand of a company, as the national gold brand, Hung said that SJC has been a well- known band both in Vietnam and the world. The use of SJC as the national brand would allow reducing the costs to develop a new brand, while this would help avoid big changes in the market

Once SJC becomes the national gold brand, other well-known brands including Rong Thang Long of Bao Tin Minh Chau Company, Phuong Hoang PNJ-DAB of Phu Nhuan Jewelry Company and Dong A Bank, ACB of Asia Commercial Bank, Than Tai of Sacombank and SBJ of Saigon Thuong Tin-SBJ, would not be able to exist on the market.

It is expected that a lot of gold companies would disappear from the market, because they cannot satisfy the high requirements set by the State Bank (100 billion dong in chartered capital, 2-year experience in gold trade, sale networks existing in at least three central cities and provinces).

What to do to exist?

While goldsmith companies feel worried stiff about their existence after the new gold market management decree takes effect, they have received the cooperation proposal from big banks and gold companies which can meet the requirements.

Tran Thanh Hai, General Director of the Vietnam Gold Investment and Trade Company, said the big banks and companies have invited him to act as the authorized agents for them. Hai added that ready made contracts have been given to him for consideration.

Hai has pointed out that in principle; the Circular No. 16 prohibits enterprises and credit institutions to trade bullion gold through authorized agents. However, the big banks and enterprises can use different methods to dodge the laws.

Hai thinks that acting as the authorized agents proves to be an inevitable trend for small companies which cannot satisfy the requirements, but do not intend to shift their business.

Analysts have also said that once businesses are not allowed to trade bullion gold, they would have to try everything they can to exist. Besides, the businesses may still keep operation, sheltering behind the companies which can satisfy the requirements, which means that contraband transactions would be carried out in the market.

In the past, the State Bank once prohibited foreign currency trade. However, the foreign currency black market has always been existing.

Doing more harm than good

Hai thinks that the tightened control over bullion gold trade would lead to a lot of problems, which would harm both the State and consumers.

The State would fail to collect tax due to the complicated relations of enterprises through the contracts on authorized agents. Meanwhile, consumers would have to buy products at higher prices. This is simply because when two enterprises cooperate in doing business, the production costs would be higher, which means that enterprises would have to charge high prices on buyers to ensure their profits.

Especially, the companies acting as authorized agents would be the biggest sufferers, because they cannot define the sale prices, they have to follow the policies set up by other companies. Besides, they have to pay “under table fees” to keep their operation.